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Month: May 2018

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DATE: March 6, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: -
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CITATION:
S. 92CB Transfer Pricing Safe Harbour Rules: If the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under rule 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm's length price of the assessee's specified domestic transactions. CBDT's circular dated 10.3.2006 could not have and does not lay down anything to the contrary

In the present case, admittedly, after the petitioner exercised such an option, the Assessing Officer passed no order under subrule (4) of rule 10THD declaring that the exercising of option was invalid. In terms of subrule (7) and subrule (8) of the said rule, therefore, the option exercised by the assessee would be treated as valid. Once this conclusion is reached, it follows as a natural and necessary corollary that the Transfer Pricing regime would not apply. That being the case, the Assessing Officer had no authority to make any reference to the TPO to ascertain the arm’s length price of the petitioner’s specified domestic transactions. Reference itself was therefore, invalid. CBDT’s circular dated 10.3.2006 could not have and does not lay down anything to the contrary. The circular merely prescribes the circumstances under which the Assessing Officer would make reference to the TPO. Nowhere does the circular provide that as soon as such circumstances exist, the Assessing Officer would make a reference to the TPO, irrespective of the fact that the assessee had opted for safe harbour and such option was treated or deemed to be treated as validly exercised. Legally speaking, CBDT could not have given any such directive. Eventually no such directive can be discerned from the circular.

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DATE: May 1, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: -
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CITATION:
S. 253(5) r.w.s. 252(1): The Registrar of the Tribunal has no jurisdiction to consider and decide on applications for condonation of delay. Only the Court/ Tribunal have the power. The order passed by the Registrar is ultra vires his power and non est in law. He should desist from passing such orders

The power of condoning the delay is with the Court/Tribunal under the Limitation Act as well as u/s 253(5) r.w.s. 252(1) of the Income Tax Act. The petition of assessee has to be examined by the court/Tribunal after hearing both the parties and after considering the reasons, facts etc. Hence, the order passed by the Registrar is ultra virus beyond his power. hence his order is non-est in the eyes of the law. Henceforth the Registrar should desist from passing such orders and he should put up all petitions before the Bench.

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DATE: April 24, 2018 (Date of pronouncement)
DATE: May 2, 2018 (Date of publication)
AY: -
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CITATION:
S. 10A: If deductions on freight, telecommunication and insurance attributable to the delivery of computer software u/s 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the assessee which could have never been the intention of the legislature As the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd

In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. The definition of total turnover given under Sections 80HHC and 80HHE cannot be adopted for the purpose of Section 10A as the technical meaning of total turnover, which does not envisage the reduction of any expenses from the total amount, is to be taken into consideration for computing the deduction under Section 10A. When the meaning is clear, there is no necessity of importing the meaning of total turnover from the other provisions. If a term is defined under Section 2 of the IT Act, then the definition would be applicable to all the provisions wherein the same term appears. As the term ‘total turnover’ has been defined in the Explanation to Section 80HHC and 80HHE, wherein it has been clearly stated that “for the purposes of this Section only”, it would be applicable only for the purposes of that Sections and not for the purpose of Section 10A. If denominator includes certain amount of certain type which numerator does not include, the formula would render undesirable results.

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DATE: April 24, 2018 (Date of pronouncement)
DATE: May 2, 2018 (Date of publication)
AY: -
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CITATION:
Loan Waiver - Applicability of S. 28(iv) & 41(1): (a) S. 28(iv) does not apply if the receipts are in the nature of cash or money (b) S. 41(1) does not apply if the waiver of loan does not amount to cessation of trading liability i.e if the assessee has not claimed any deduction u/s 36 (1) (iii) of the IT Act qua the payment of interest in any previous year

On a perusal of section 41(1), it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability

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DATE: April 24, 2018 (Date of pronouncement)
DATE: May 2, 2018 (Date of publication)
AY: -
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CITATION:
S. 80-IA(4): Inland Container Depots (ICDs) are Inland Ports and income earned out of these Depots are eligible for deduction. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places

Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA of the IT Act, the appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term ‘Inland Ports’ is used differently under Section 80-IA of the IT Act. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.

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